Observation: AI CapEx Persists, Expands - AI Boom, Plausible Wins/Pain Points

Despite DeepSeek's efficiency breakthrough sparking fears of AI investment pullbacks, Big Tech has doubled-down with unprecedented capital commitments. Meta, Amazon, Alphabet and Microsoft plan to spend $320 billion combined in 2025, up from $230 billion in 2024. This isn't cutting back - it's acceleration.

MARKET IMPLICATIONS – AI BOOM PLAUSIBLE WINS/PAIN POINTS

There is an infrastructure constraint fundamentally changing the AI investment thesis. Rather than a winner-take-all dynamic among chipmakers, we're entering a phase where utilities, power generation, and grid technology are the choke points. While DeepSeek’s revelations cheapen and democratizes AI, it comes with massive infrastructure investment needs and opportunity.

The Coming Electrical Constraint: The AI buildout is creating an unprecedented demand shock for the US electrical grid. The Department of Energy projects data center electricity consumption will double or triple by 2028, with data centers accounting for 44% of all US load growth through 2028. It’s estimated that $720 billion in grid investments will be needed through 2030. 1

AI development may ultimately be constrained not by chip availability or computing power, but by the mundane reality of electrical infrastructure. Data centers that once took 18-30 months to build now face 2-4 year waits just to connect to the grid.

A Technology Resilience Thesis: JP Morgan notes that “large language models can now deliver PhD-level outputs, while their costs have declined by between 80% and 99%.” 2 Their analysis shows economic history is “replete with examples of technologies that enabled adoption after costs declined dramatically,” citing air travel, personal computers, and mobile phones. Note: In all instances, users were beneficiaries, and those industries experienced - still do, exceptionally low margins. The users, however, other industries, people, will reap benefits (mostly corporations in the form of higher profit margins), with people enjoying the user experience, but likely eventuating in large, junior level job losses.

ENERGY DEMANDS REQUIRE NEEDED INFRASTRUCTURE – IN A HURRY

Beatrice Advisors is a Multi-Family Office delivering high-quality financial services and exceptional value to a new generation of wealthy families and individuals. This article is excerpted from Beatrice Buttress Volume 1, Issue 4. Our Beatrice Buttress writings are a monthly series, a late-month take on the macroeconomic and other events of the past four weeks, necessary for us to analyze to understand the ramifications for the markets that we invest in for our partner-clients, and implications for portfolios.

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1. Data Centers, AI and the Evolving Energy Landscape, The Commonfund, April 25, 2025

2. Mid-Year Outlook: Comfortably Uncomfortable, JP Morgan, May 2025